- Operating profits down six per cent
- Volumes lower, costs higher
- Revenue up three per cent

Profits at oil and gas company BG Group declined in the first quarter despite higher revenues, as lower production volumes and higher costs ate into the bottom line.

The company, which earlier in the week announced the resignation of Chief Executive Chris Finlayson and warned that 2014 output would be at the lower end of guidance owing to issues in Egypt, said that total operating profits during the first three months of the year were down 6% at $2.01bn.

This reflected reductions in both the Upstream and Liquefied Natural Gas (LNG) Shipping & Marketing segments.

In Upstream, higher revenues were more than offset by higher operating costs. Meanwhile in LNG Shipping & Marketing, better LNG margins were outweighed by a lower number of deliveries, with no BG Group cargoes from Egyptian LNG.

So-called 'Business Performance' earnings per share (EPS), which exclude disposals and other items, were down 3% at 33.8 cents. Reported EPS fell 9% to 32.4 cents.

Group revenue and other operating income increased by 3% to $5.06bn, helped by a significant increase in Upstream oil volumes, particularly from Brazil, despite lower exploration and production (E&P) volumes and LNG cargo deliveries.

Total E&P production volumes were broadly unchanged on the fourth quarter at 633,000 barrels of oil equivalents a day (boed), but were down 4% over the year.

BG Group said on April 28th that Finlayson would leave the company immediately "for personal reasons" and Non-Executive Chairman Andrew Gould would take over as interim Executive Chairman until a replacement is found.

In a statement on Thursday, Gould said that the company "continued to make good progress" in the first quarter with its key growth projects in Australia and Brazil.

He said: "Group production volumes for the first quarter were consistent with our anticipated seasonal phasing, although production entitlement from Egypt was lower than expected as domestic offtake remains well above contractual commitments and reservoir performance deteriorates. As a result of the challenges in Egypt, the group's 2014 production is now expected to be at the lower end of the guidance range."

Nevertheless, the company's guidance range for this year remains unchanged at 590,000 to 630,000 boed.

BG Group said that the "deterioration in Egypt" will have a similar impact on 2015 production, though guidance for next year will not be given until its full-year results next February.

The stock was 0.2% lower at 1,195.55p in early trading on Thursday.

BC

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